Ethylene arrives with cross-strait implications

A shipment of 3,500 tons of made-in-China ethylene arrived in Kaohsiung yesterday, marking the advent of a somewhat tentative direct shipping link between Taiwan and China.

The shipment, having proved that the transportation of ethylene across the Taiwan Strait is technically feasible, could pave the way for cross-strait cooperation in supplying each other's need for raw materials and even convince the Ministry of Economic Affairs (MOEA) to lift the ban on the relocation of the naphtha cracking industry to mainland China.

"Pengshun (鵬順輪)," a mainland Chinese ethylene tanker that had set sail from Nanking in China's eastern coastal province of Jiangsu, crossed the Taiwan Strait directly and reached Taiwan's southern port city without having to stop over in a third country first. Previously, such shipments were required to make a detour to a third country port before they could reach their mainland or Taiwan destinations.

At 10:30 a.m., a ceremony was held at the CPC Corporation Taiwan's Cianjhen Storage Facility to mark its first-ever port call there.

The shipment was ordered to make up for a shortfall in CPC Corporation Taiwan's output and is unrelated to the temporary closure of the country's No. 6 naphtha cracker, CEO Huang Dan-shiung (黃登祥) of CPC's Petrochemical Business Division told reporters yesterday.

CPC Corporation Taiwan's ethylene production capabilities cannot meet the demand of downstream manufacturers because the No. 5 naphtha cracker it operates is shut down for a major overhaul and will not come back online until after Sep. 22, when it conducts a test run, Huang explained.

Production at the No. 6 naphtha cracking complex operated by Formosa Plastics, deemed unsafe after a series of fires earlier this year, was suspended by government order last month.

In the past, when the two Taiwan petrochemical giants could not meet the demand for ethylene, they would ask Japanese or South Korean companies to import it from the Middle East on their behalf, and never from China, according to Huang.

CPC Corporation Taiwan will face a 500,000-ton shortfall in output in 2015, when the No. 5 naphtha cracker will be permanently shut down, if nothing could be found to take its place.

In the meantime, CPC Corporation Taiwan is negotiating with mainland China's Sinopec Group for further shipments, Huang revealed.

The ethylene shipment has helped dispel fears that cross-strait shipping of ethylene might not be possible and may make it easier for MOEA to figure out a way to prevent future shortages since the scrapping of the controversial Kuokuang Petrochemical Project, according to industrial sources.

MOEA is said to be considering lifting the ban on the relocation of naphtha crackers to mainland China on condition that the ethylene produced there is shipped back to Taiwan. Another option being considered is to promote the production of high-value products by the petrochemical industry. However, a costly technological upgrade would be required.

If cross-strait shipping of ethylene is feasible, it may be feasible to ask mainland China to ship it to Taiwan from the Middle East, too, because mainland China can buy it from Iran, while Taiwan cannot, a source said.

At present, Iran is the world's most important source of ethylene, but the United States sanctions against the Persian Gulf state are making it impossible for Taiwan to secure a supply there, while mainland China can ignore such sanctions with impunity, the source explained, adding China could easily resell part of its purchase there to Taiwan at a profit.

A major technical hurdle shippers of ethylene must surmount is that the substance must be shipped at a super-low temperature of minus 103 degrees Celsius, which makes it costly to ship. The cost of shipping a single ton of ethylene to Taiwan is US$100 if it is shipped from mainland China and NT$250 if shipped from the Middle East.